Tarsus Pharmaceuticals, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; filed May 11, 2022. Tarsus is a clinical-stage biopharmaceutical company focused on developing therapeutics, starting with eye care. It had no product sales. Reported revenue came from its China out-license and collaboration with LianBio.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $0.5 million | $33.4 million |
| Research and development expense | $12.1 million | $16.3 million |
| General and administrative expense | $7.9 million | $5.2 million |
| Operating loss / income | $(19.5) million | $10.7 million |
| Net loss / income | $(20.2) million | $10.4 million |
| Operating cash flow | $(15.3) million | $(11.8) million |
- Cash and cash equivalents were $175.0 million and marketable securities were $0.3 million at March 31, 2022. The company reported an accumulated deficit of $66.9 million.
- Cash, cash equivalents and restricted cash increased by $3.7 million during the quarter, primarily reflecting $20.0 million drawn under a new credit facility, partly offset by operating cash use and financing costs.
- At quarter-end, term debt was $20.0 million gross and $19.2 million net of debt issuance costs and related adjustments. The facility carries a floating rate; the stated rate was 8.70% at March 31 and rose to 9.20% on May 5, 2022.
- No meaningful product-sales margin was reported; the company had not launched a product.
Changes versus the prior-year quarter
- Revenue fell by $32.9 million, chiefly because Q1 2021 included $33.3 million in license fees, while Q1 2022 recognized no license-fee revenue and $0.5 million of collaboration revenue. The company said Q1 2022 revenue reflected partial satisfaction of China out-license performance obligations, not new cash receipts.
- The result shifted from net income to a $20.2 million net loss. Q1 2021 revenue included a substantial out-license recognition; no cash related to that revenue was received during that quarter either.
- R&D expense declined $4.2 million, mainly because the prior-year quarter included non-recurring in-license payments. Higher clinical, manufacturing, payroll and personnel costs partly offset the decline. G&A rose $2.8 million, primarily due to added staff and commercial and market research costs.
- Other expense increased, including interest on the new loan and non-cash fair-value losses on LianBio shares and warrants.
Outlook, developments and risks
- Management expected the company’s March 31 resources to fund operations for at least 12 months from the filing date. Including the May offering, expected 2022 LianBio milestone proceeds and conditional credit availability, management estimated funding could support planned operations into 2026. This estimate depends on assumptions and may change.
- On May 5, 2022, after quarter-end, Tarsus completed a 5.6 million-share offering at $13.50 per share, generating approximately $70.6 million in net proceeds. Underwriters also received a 30-day option for up to 840,000 additional shares.
- In May 2022, the company announced positive topline results for the TP-03 Saturn-2 Phase 3 trial and said it planned to use Saturn-1 and Saturn-2 data to support an NDA submission in the second half of 2022. These were post-quarter developments, not Q1 results.
- Tarsus remained loss-making with no product sales and expected significant operating losses as it advanced TP-03 and other candidates. Future revenue and funding depend on clinical and regulatory outcomes, commercialization, LianBio milestones and access to financing.
- Key risks include clinical-trial failure or delay, FDA requirements or approval timing, manufacturing and third-party dependencies, competition, possible COVID-19 disruption, and the possibility that additional capital may be needed on unfavorable terms. Credit-facility covenants restrict certain actions. The filing reported no material litigation contingencies known to management.
Important facts for investors to verify
- Whether TP-03 meets clinical and regulatory requirements and whether the anticipated NDA timing is achieved.
- Timing, conditions and receipt of LianBio milestone payments, royalties and other contingent consideration; Q1 recognized revenue did not produce Q1 cash receipts.
- Actual operating cash burn relative to management’s estimated runway, including the assumptions behind the projection into 2026.
- Credit-facility draw conditions, covenants, floating-rate exposure and repayment terms, as well as the net proceeds and any exercise of the offering’s underwriters’ option.
- Potential dilution from equity offerings and outstanding equity awards; the filing reported 20.7 million common shares outstanding at quarter-end, before the May offering.